Find out why you're being turned down
If you're struggling to get a car loan, it helps to find out why. After all, there's a big difference between not being able to get a loan because you have no credit history versus being unable to borrow because you have a record of making poor financial choices.
If you're denied a loan because of something on your credit record, you're entitled to an adverse action notice to see details. It's a good idea to read through it in case something may be wrong, such as incorrect information being listed or perhaps an unknown account was opened and left unpaid.
If nothing obvious jumps out, you can ask the lender about the issue. If they tell you it's because you have no credit, you'll have a different problem to solve than if they say it's because you have too little income or assets.
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Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.
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Once you've identified the issue, it's time to look into options available to borrow for your vehicle.
If it's just your credit that's the problem, there are plenty of dealers out there advertising bad credit or no credit loans, but you'll likely want to steer clear of them. The terms of the transaction are usually quite unfavorable and you risk getting an expensive loan that damages your finances.
A better solution may be to ask your parents to cosign for an auto loan if they have good credit. Cosigning can be a precarious prospect for borrowers, but if both parties trust one another and payments are made on time, it can be mutually beneficial.
Another alternative could be to approach your bank or credit union to see if they might be able to give you a loan with traditional underwriting involving a full review of your finances rather than just a credit check.
These options can help you borrow at a more affordable rate so you can get into your vehicle sooner. Making a large down payment for the car and limiting how much you borrow can also help.
Consider improving your credit — or paying cash
If you're unable to get an affordable loan right now, you might have a few other options if you have a little time to wait.
One of the best solutions may be to save up and buy a car in cash. You don't need an auto loan to own a vehicle, even though most people get one, and you may have more negotiating leverage if you do an all-cash deal. You'll also save on interest and avoid committing to a monthly payment.
Alternatively, you can work on building credit by applying for a secured credit card, charging a small amount on it each month and paying your bill on time. These low-limit cards, which require a deposit, allow you to establish a borrowing history and build up your credit score.
If you can move forward with a cosigned car loan or one you get from your bank or credit union, that can also help with your credit-building efforts, which could improve your overall financial situation in the long haul, if you keep up with payments.
Those who borrow can have an easier time with important purchases such as a home or car, but if you don't have a credit history it's worth solving this problem now before it becomes a repeated issue in the future.
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